BOOKKEEPING I

Special Terms 

Liability :  An obligation that is owed by an organization : debt to other organizations for merchandise or services; wages owed to employees; accrued (owed but not yet paid) taxes; and payments due on loans or mortgages.


Capital : The investment in an organization or business by its owner or owners. Other terms often used instead of capital are owners’ equity, often abbreviated OE, and proprietorship.

Account : A record of the changes and balances in the value of an individual item listed in the ledger (see next page) of an organization. An example of an asset account is the company’s furniture and fixtures, usually listed as one item since it would be impractical to list every desk and chair. Each account, usually abbreviated a/c, frequently has its own page in the organization’s ledger.

Double-entry : A method of bookkeeping in which the twofold effect of every entry is recorded, this equiring two entries to record each transaction. By recording both effects of each transaction, this system offers protection against error.

Debit : An amount entered on the left-hand side of an account. Asset and expense accounts are increased by debiting, that is, by entering amounts in the left-hand column. Debit is usually abbreviated DR.

Credit : An amount entered on the right-hand side of an account. Liability, capital, and income accounts are increased by crediting, that’s is, by entering amounts in the right-hand column. Credit is usually abbreviated CR.

Journal : A book in which transactions are recorded. In double-entry bookkeeping, both sides of the transaction-both the debit and the credit side-are entered in the journal.

Ledger : A listing of detailed accounts, such as a record comprising the accounts receivable of each customer. The general ledger is the book used to list all the accounts of an organization. Entries from all the journals are transferred to the ledger at regular intervals, usually monthly. This process is called posting. The ledger then server as a summary of all the fiscal activity for that period.

To Foot : To add or total the amounts in a column.

Trial Balances : When all the transactions for a certain period have been posted and footed, the debits should equal the credits. The test to see if this is so is called a trial balance.

Post by : Rony Sutiyanto